NuVasive Inc. Earnings: Margins Shrink Again, Net Income Falls

Rising costs hurt NuVasive, Inc. (NASDAQ:NUVA) in the first quarter as profit dropped from a year earlier. NuVasive is a medical device company focused on the design, development, and marketing of products for the surgical treatment of spine disorders.

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NuVasive Earnings Cheat Sheet for the First Quarter

Results: Net income for NuVasive, Inc. fell to $673,000 (2 cents per share) vs. $2.4 million (6 cents per share) a year earlier. This is a decline of 71.5% from the year-earlier quarter.

Revenue: Rose 21.9% to $151.7 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: NuVasive, Inc. reported adjusted net income of 20 cents per share. By that measure, the company beat the mean estimate of 7 cents per share. It beat the average revenue estimate of $143.6 million.

Quoting Management: Alex Lukianov, Chairman and Chief Executive Officer, said, “Our financial performance in the first quarter of 2012 attests to excellent execution of our market-share taking strategy, and gives us increased confidence in our ability to achieve our full year revenue and profitability guidance. As we focus on execution toward our 2012 objectives, we are also making the necessary investments into NuVasive’s differentiation and share taking strategy. Our commitment to maintain NuVasive’s innovative prowess, to drive superior clinical outcomes, and to nurture our Absolute Responsiveness culture are the drivers of our success to date and will carry us beyond $1 billion in revenue. Looking forward, we expect our top line to grow in conjunction with an improving profitability profile and continual improvements in free cash flow. We are laying the groundwork today to become the #3 spine company in the world.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 14.8%, with the biggest boost coming in the most recent quarter when revenue rose 21.9% from the year earlier quarter.

Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell 5.4 percentage points from the year-earlier quarter to 75.7%. In that span, margins have contracted an average of 3.3 percentage points per quarter on a year-over-year basis.

The company has now surpassed analyst estimates for four quarters in a row. It beat the mark by 4 cents in the fourth quarter of the last fiscal year, by one cent in the third quarter of the last fiscal year, and by 2 cents in the second quarter of the last fiscal year.

NUVA’s profit in the latest quarter ends a two-quarter streak of losses. The company reported a net loss of $10 million in the fourth quarter of the last fiscal year and a loss of $67.6 million in the third quarter of the last fiscal year.

Looking Forward: Over the past ninety days, the average estimate for the second quarter has fallen from 14 cents per share to 12 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. For the fiscal year, the average estimate has moved down from 53 cents a share to 47 cents over the last ninety days.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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